Rokslide Real Estate Investing Thread

[jtevanMT]

This is retail not office space (ain’t doin any office spaces!). Sold a property earlier this year with a low basis so looking at doing a 1031 so I don’t get killed in taxes. This is the biggest reason for me to look at buying CRE vs investing in stock market REIT.

It’s a great location and current tenant is a franchisee for a large franchisor in this market and rapidly expanding. They do quite well from my understanding and research. The current area around it is continuing to grow and expand so that’s a major positive as well. I own another piece of real estate around the corner and everything seems to point in an upward direction especially since I’m in Florida. I figure in 10 years I will have a steady 8.5%+ rate of return and the property should appreciate nicely. I should see an IRR of at least 12-14% annually in 10 years.

Also, the property is essentially a brand new build as of last year. This seller works with the franchisor to build out properties for new franchisees then sells them.

I already have a specialty REIT investment that is paying 8% dividends and they are continuing to expand so as long as I stick with that for another 2 years I should see an additional ROI on my initial investment plus the monthly dividends.

The biggest positive is the absolute NNN lease and I really like the location. I drive by it multiple times a week and they are always super busy so I can somewhat assume they are doing well.

Sounds like you have done the homework. If you can get the property at a decent price it seems like a good investment. I own both commercial and residential properties for both ROI and income. In the middle of a 1031 exchange now, swapping out an older house for a new townhome to reduce maintenance costs and increase rental income. A few renter issues over the years, but all properties have been a great investment.

 

[peterk123]

Yes, closed less than 30 days ago. You have 45 days to identify and 180 days to close on replacement property. Like kind can pretty much mean any income producing property so the options are very open ended. The funds are with a qualified intermediary so that had to be setup well before selling the property you are disposing of. This is my 8th or 9th 1031 so I’m pretty familiar with the process.

For every dollar I don’t do a 1031 exchange on I’ll pay a bunch of taxes which is what I’m trying to avoid. The original property I purchased back in 2002 so I have a super low basis.

I’m willing to take a little lower cap rate for potentially less headache as you would have with STRs. If I can end up with an 8+% cap rate avg over 10-15 years and an appreciating property I’m good with that!

8% plus these days is tough for any reasonable property. But I agree that 8% or above is where we should be. Reasonable risk is just not baked into cap rates these days.

Keep us posted. Love to see the details if you find one. Heck, I'm watching residential popping off at 6%. It's nuts. Investing in real estate has turned into making money on appreciation, not cash flow. When this all goes south, it will be epic.

I just saw delinquency stats on CMBS. Not good.

 

[SDHNTR]

I’ve already got 2 full time jobs. I don’t need another hence the reason I’m looking for a somewhat hands off scenario.

No such thing amigo. Invest elsewhere if you want hands off.

 

[peterk123]

No such thing amigo. Invest elsewhere if you want hands off.

Full NNN single tenant lease to a credit tenant is pretty much hands off. You're biggest concern is if it goes dark.

 

[180ls1]

Full NNN single tenant lease to a credit tenant is pretty much hands off. You're biggest concern is if it goes dark.

Yeah, there is too much variety in RE investments to say its fully one way or another. It most certainly is not passive and can scale all the way up to active "job like."

It really should be treated like a business regardless of where you land. If you are working with property management, that does not mean you can just hand everything over and be carefree. You need to be diligent in your practices with them even if they "do all the work."

 

[Huckelfin]

No such thing amigo. Invest elsewhere if you want hands off.

This is sort of replying to you, sort of to the OP, so don't take this as me preaching directly to you or something.

I agree, and you being a jack of all trades is a must if you don't want to see a years worth of profit vanish in a few seconds from other people doing work for you.

On the other hand, hiring a property manager to take care of things, absolutely can reduce the time spent dealing with the property for sure. Nothing is completely hands off, though. Also the obvious downside of further cutting into profit margin, which is inevitably going to be thin unless you have access to a sick deal. Most regular people don't have this or enormous capital to begin with. That's why these massive corporations win, it doesn't matter to them. Invest in VTI, its way easier lol! (kind of joking kind of not, its cool to diversify too).

 

[MtnW]

Invest in what you have knowledge of and a passion for.

 

[arrow179]

Pfizer will shoot your ass up with mRNA
Which has killed thousands of young men. Besides that this a Real Estate thread not Stock Market.

 

[One300wsm]

View attachment 1075950

My apologies sir, my 16 year old granddaughter was trolling through my Rokslide I always have it up, I deleted the post. Her 40 year old father died from what seems to be from the mRNA vaccine which he was forced to take. An autopsy showed string of white clots in his arteries which isn’t normal for a heath 40 year old much less one whom is a triathlon athlete. Yea probably don’t know what she’s talking about. Blood money . Prayers are with you if you got jabbed by the mRNA, you never know which part of the body it will reside.
Best wishes

 

[moewells100]

Since there is a stock trading thread I thought it would be good to start a real estate investment thread. Let’s hear about what you savvy real estate investors are doing.

I’m looking at buying a commercial property with an absolute NNN lease in place with the current tenant having 14 years remaining on a 15 year lease with rent increase every 5 years of 10%. I’m aiming for a 7% cap rate for the purchase price. The seller wants a 6.25% cap rate price. Any advice as this would be my first commercial property with this type of lease agreement?

FYI - I’ve owned and do currently own other types of real estate investments.

I’m your Huckleberry. Vet the tenant financials and stability. Also, is the lease with the large corporate entity or some throw away LLC?

Secondly, often times people overpay for deals like this. Check the price per square foot and compare it to what’s trading in your area. If tenant leaves that is very, very relevant to you.

 

[arrow179]

I’m your Huckleberry. Vet the tenant financials and stability. Also, is the lease with the large corporate entity or some throw away LLC?

Secondly, often times people overpay for deals like this. Check the price per square foot and compare it to what’s trading in your area. If tenant leaves that is very, very relevant to you.

Yes this will all be part of our due diligence. From my understanding the tenant has one of the top 10 gross revenues out of all their stores and is doing very well. It’s in a very busy location and gets lots of traffic.

 

[moewells100]

Yes this will all be part of our due diligence. From my understanding the tenant has one of the top 10 gross revenues out of all their stores and is doing very well. It’s in a very busy location and gets lots of traffic.

What’s the price per square foot? And what’s a new build cost in same area?

Don’t just value on the cap rate. If tenant defaults and you have to backfill, mkt lease rates and your original basis become key

Without having the details on your particular deal, be careful. Developers put these out there, hoping someone will pay more than the cost of a new build due to the cap rate and over the market lease rate.

 

[grossklw]

If you hire a quality PM a lot of your headaches will go away (or at least minimize). I have bi-weekly meetings with mine and can see all communication through AppFolio so I have a pulse of what's going on, but I'm not getting any phone calls from tenants. My PM makes me significantly more than what they cost me. We all had to do DIY land-lording when you're first getting going but once you hit a certain tipping point it's a lot easier to pawn that portion off.

It's tough to make a bunch the first couple years of owning it. Most of mine kicked off a little bit of cash flow, but the real trophy is the eventual debt pay-down and appreciation.

A lot of my buddies are hell bent on straight return on equity and are constantly doing cash-out refi's to buy more which is probably the correct maximized wealth building decision, but there are a lot more headaches and risk with resetting that amort clock every few years. I sleep like a baby with my current equity position, it's also nice using the lines of credit with large equity position to pounce on deals in all-cash when they come up and refi immediately.

The STR's are fun, but I bought all mine before everything went nuts (my lake superior property has 3x in value in 5 years, most of which is luck). I have a rather large buffer of equity and cash flow on the STR's where my profit would have to get cut by 50%+ to be in trouble. Which could happen but I doubt it.